The IESO's real-time energy market, also known as the physical market, serves as a platform for matching the supply and demand of electricity.
Every five minutes, a market clearing price (MCP) is set based on the bids and offers that are settled in whole electricity market. For each five-minute interval, dispatch instructions specify the required amount of energy to be injected (by sellers) or withdrawn (by buyers) based on their accepted offers and bids.
Role of Dispatchable Generators
Dispatchable generators submit offers to supply electricity in different quantities and prices for each hour of the day. They must be able to adjust the amount of electricity they generate in response to new instructions issued every five minutes by the IESO.
Role of Dispatchable Loads
Dispatchable consumers, also known as loads, can submit bids to purchase electricity. Dispatchable loads must be able to adjust their power consumption in response to new instructions coming every five minutes from the IESO. If the Ontario energy price is greater than the price they are willing to pay, the dispatchable load must reduce consumption to meet their dispatch instructions.
Role of Importers and Exporters
The Ontario electricity market is interconnected with five other jurisdictions: Manitoba, Minnesota, Michigan, New York and Quebec allowing market participants access to energy throughout eastern North America. Market participants can import energy or operating reserve from another control area into Ontario, as well as export energy from Ontario. Participants can also move energy through Ontario from one jurisdiction to another in a type of transaction called a linked wheel.
To complete an import transaction, a participant must make an offer in the IESO-administered market. Import offers are considered along with all other offers received from suppliers. An import offer is accepted and scheduled on the following conditions: if it is required to meet demand; if it is economical in comparison to other supply; and if it can be physically accommodated by the intertie and the IESO-controlled grid.
In order to export energy, a participant must place a bid in the IESO-administered market to purchase energy at the intertie point between two jurisdictions (e.g. Ontario and New York). An export will be scheduled if the bid is economical and the intertie and IESO-controlled grid can physically accommodate the transaction.
Importers and exporters of electricity are issued dispatch instructions for each hour.
Role of Wholesalers and Retailers
Both wholesalers and retailers re-sell electricity. They do not need to have physical facilities that produce or consume electricity to participate in Ontario's real-time and financial markets. Wholesalers buy energy in the wholesale market and sell energy and services to other customers. Retailers sell energy and services to consumers at the retail level.
Producers and consumers of electricity who are not able to respond to five-minute signals in the market are called non-dispatchable. Non-dispatchable generators receive and non-dispatchable loads pay the Hourly Ontario Energy Price (HOEP) which is determined by using the average of the 12 five-minute market clearing price (MCP) during the space of the hour.
Non-dispatchable generators submit estimates or forecasts of energy production. They agree to be paid the HOEP, regardless of what that price might be. A self-scheduling generation facility, such as a 10 MW biomass generator that can operate independently of dispatch instructions from the IESO, is an example of a non-dispatchable generator.
Non-dispatchable loads or consumers draw electricity from the IESO-controlled grid as needed and agree to pay the HOEP at whatever the price is determined to be. A local distribution company is an example of a non-dispatchable load.